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Financials need at least $1 trillion: analyst

Posted By admin On November 20, 2008 @ 5:05 am In Money Watch | Comments Disabled

Reuters [1]
Thursday, Nov 20, 2008

The U.S. financial system still needs at least $1 trillion to $1.2 trillion of tangible common equity to restore confidence and improve liquidity in the credit markets, Friedman Billings Ramsey analyst Paul Miller said.

Eight financial companies — Citigroup Inc, Morgan Stanley, Goldman Sachs Group Inc, Wells Fargo & Co, JPMorgan Chase & Co, American International Group Inc, Bank of America Corp and GE Financial — are in greatest need of capital, he said.

“Debt or TARP capital is not true capital. Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis,” he said in a note dated November 19.

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Currently, the U.S. financial system has $37 trillion of debt outstanding, he noted.

Combined, these eight companies have roughly $12.2 trillion of assets and only $406 billion of tangible common capital, or just 3.4 percent, the analyst said in his note to clients.

Miller said these institutions need somewhere between $1 trillion and $1.2trillion of capital to put their balance sheets back on solid ground and begin to extend credit again, given their dependence on short-term funding and the illiquid nature of their asset bases.

Full article here [1]


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URLs in this post:

[1] Reuters: http://www.reuters.com/article/ousiv/idUSTRE4AJ1GV20081120

[2] Bloomberg Analyst: $700 Billion Bailout Could Balloon to $5 Trillion: http://www.prisonplanet.com/bloomberg-analyst-700-billion-bailout-could-balloon-to-5-trillion.html

[3] US To End 2010 With $13.9 Trillion In Debt, Total Debt Incurred Since Great Financial Crash: $4.4 Trillion: http://www.prisonplanet.com/us-to-end-2010-with-13-9-trillion-in-debt-total-debt-incurred-since-great-financial-crash-4-4-trillion.html

[4] Nikkei Surges As BOJ Injects Another ¥3.5 Trillion: Just Add It To The Existing ¥23 Trillion Plunge Protection Tab: http://www.prisonplanet.com/nikkei-surges-as-boj-injects-another-%c2%a53-5-trillion-just-add-it-to-the-existing-%c2%a523-trillion-plunge-protection-tab.html

[5] Update: Make That 15 Trillion; BOJ Raises Liquidity Injection To JPY12 Trillion ($146 Billion): http://www.prisonplanet.com/update-make-that-15-trillion-boj-raises-liquidity-injection-to-jpy12-trillion-146-billion.html

[6] SEC bans short-selling for financials: http://www.prisonplanet.com/sec-bans-short-selling-for-financials.html

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